More Than Enough

My Social Security annual statement says that my employers and I have contributed over $260,000 to the Social Security fund over five decades. Thirty-year Treasury bonds over those five decades have been as high as 14% in the 1980s and as low as 3.5% more recently.

If we amortized my contributions over 50 years at a 5% flat rate starting with a principal of zero and building incrementally, I would have a total accrued balance of approximately $1.1 million.

My life expectancy is 15 years. At $25,000 benefit per year, my total lifetime benefit will probably be about $375,000 in today's dollars. (Further interest will more than make up for any increase in benefit due to inflation.) Even if my calculations are off by 50%, how in the world does Epstein figure that the government is subsidizing me or anyone else for that matter?

Social Security was started as a forced contributory pension program in the 1930s. This is not an entitlement program, and no one is subsidizing anyone else, as a worker's benefit is based on what he contributed to the Trust Fund. If long-term future shortfalls in the fund are predicted, the solution is obvious—simply raise the contribution rate to match the expected payouts, and stop using the money to fund general government expenditures.

The real problem is that the politicians have squandered the Trust Fund's assets, and none of them have had the courage to tell the electorate that general income-tax rates will have to rise markedly to pay back the money that has been taken from the Trust Fund. William E. Maliha Saugerties, N.Y.

To the Editor: Regarding Epstein's proposal to employ means-testing for certain entitlement programs: If enacted, Social Security will become nothing more than a redistributionist tool, another complicated, inefficient, and expense-ridden welfare program. That is not how it was sold to the American public back in the 1930s. Moreover, means-testing would add more burdensome regulations in administering the already-complicated program.

As to military pensions, they are not pensions in the traditional sense. They are retirement pay, or reduced compensation for reduced services. Even after retiring, military retirees currently drawing retirement pay (active-duty retiree), or reservists or national guardsmen eligible for retirement pay, are always eligible for recall to active service. When I retired from the Air Force Reserve as a pilot in 1997, one of the last instructions given me was to keep my flying gear in good working order. Paul M. DeSisto New York City

Gene Epstein replies: There never was a real Trust Fund, and Social Security never was a real pension program because all the money collected through payroll taxes was commingled with all other sources of federal revenue to help cover the general cost of government.

Social Security is therefore an entitlement program, and any other way of characterizing it is sheer folklore. So while William E. Maliha is correct that taxes "will have to rise markedly" to pay for Social Security, he should have added that higher taxes will be required to cover the soaring cost of all government.

As for Paul M. DeSisto's point that military pensions are not pensions in the traditional sense: I assume he'd agree that former Air Force pilots over 70 no longer have keep their "flying gear in good working order."

Invidious Comparison

To the Editor: It's ironic that financial pundits predict disastrous consequences for Japan due to its quantitative-easing program while evincing no concern about the eventual outcome of such measures in the U.S. ("Does Japan Face a Debt Apocalypse?" April 15).

By the end of 2013, the Fed's balance sheet will have quadrupled to $4 trillion, and it will require less than a 50-basis-point increase in yields to eviscerate its equity. While it's true that Japan has a much higher debt to gross-domestic-product ratio than the U.S., most of Japan's debt is owned by Japanese citizens and institutions, not subject to a sudden flight of capital.

The recent decline of the yen is nothing more than the beginning of a return to a more normal level, following a massive rise triggered by the Fed's seemingly infinite quantitative-easing program. In June 2007, the exchange rate was 123 yen to the dollar.

Virtually all of the criticisms leveled at the Bank of Japan could be aimed at the Fed as well. We would be better served by evaluating the risks of our own massive easing measures rather than assessing the risks in Japan. Robert M. Sussman Paradise Valley, Ariz.

Investing in Ashes

To the Editor: I like a good return on investment as much as the next investor, but I was appalled to read Morgan Stanley's Adam Parker blithely and enthusiastically recommend buying tobacco stocks ("Quantamentally Speaking," April 15). And he does so in part because Philip Morris International "is diversified over multiple counties around the world, with no exposure to the decline in U.S. smoking."

Tobacco companies have moved to where they can hook more and more people, especially kids, on their lethal products without worrying about the kind of healthy regulations that are saving and will continue to save countless lives here. At some point, even the most aggressive investor has to come up against some minimal standards of decency. Parker seems to have not found his. Steve Heilig San Francisco

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